Doing Business in the USA Guide
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Basic information about doing Business in USA - Federal and State Tax rate, Incorporation of the company, other Tax IDs and numbers for starting a Business in USA, Buying Business or real estate in USA
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Doing Business in the USA Guide
- 1. DOING BUSINESS IN THE USA Prashant Ajmera, B.Sc. LL.B. India ICSA (UK) Law Office of Prashant Ajmera & Associates 1
- 2. Introduction2 Law Office of Prashant Ajmera & Associates
- 3. Introduction Law Office of Prashant Ajmera & Associates Prashant Ajmera, LLB Institute of Chartered Secretary and Administration (ICSA) Bachelor of Law, Gujarat University Bachelor of Science, Gujarat University Experience in corporate law and international trade Member of International Bar Association 3
- 4. Introduction Law Office of Prashant Ajmera & Associates Anahita Jagtiani, Esq. Licensed to practice law in the US Member of Pennsylvania Bar Association Juris Doctor (JD), Pennsylvania State University Bachelors in Accounting & Law, Drexel University 4
- 5. Setting up a Business5 Law Office of Prashant Ajmera & Associates
- 6. Forms of Business Organizations Law Office of Prashant Ajmera & Associates 6 Corporation Branch of a Foreign Corporation Partnership Limited Liability Company (LLC) Joint Venture (JV)
- 7. Points to Consider prior to Incorporation Law Office of Prashant Ajmera & Associates 7 State of Incorporation Name of the Corporation Minimum Capital Nationality or Residency Requirements Tax Returns Office Leases Insurance Corporate Bank Accounts Repatriation of Capital
- 8. Taxation in the US8 Law Office of Prashant Ajmera & Associates
- 9. Taxpayer Identification Numbers Law Office of Prashant Ajmera & Associates 9 Social Security Number (SSN) Employer Identification Number (EIN) Individual Taxpayer Identification Number (ITIN) Preparer Taxpayer Identification Number (PTIN)
- 10. Federal Corporate Tax Rates (2014) Law Office of Prashant Ajmera & Associates 10 Taxable Income Over Under Tax Rate $0 $50,000 15% $50,000 $75,000 25% $75,000 $100,000 34% $100,000 $335,000 39% $335,000 $10,000,000 34% $10,000,000 $15,000,000 35% $15,000,000 $18,333,333 38% $18,333,333 - 35%
- 11. State Income Tax Rates (2014) Law Office of Prashant Ajmera & Associates 11
- 12. Combined State and Average Local Sales Tax Rates (2014) Law Office of Prashant Ajmera & Associates 12
- 13. Buying an Existing Business v. Starting a New Business 13 Law Office of Prashant Ajmera & Associates
- 14. Buying an Existing Business Law Office of Prashant Ajmera & Associates 14 In some cases, buying an existing business represents less of a gamble than starting a new business from scratch. However, you must perform due diligence to ensure that you are fully aware of the terms of the purchase. If you have decided to buy an existing business, you will want to be sure you are making the right choice in your new venture.
- 15. Advantages of Buying an Existing Business Law Office of Prashant Ajmera & Associates 15 Reduction in startup costs Availability of human resources Possibility of jump starting cash flow due to existing inventory or receivables Better financing options due to cash flow
- 16. Points to Consider prior to Purchasing an Existing Business Law Office of Prashant Ajmera & Associates 16 There are many different types of businesses to buy. Take the following steps to narrow down the list of potential businesses you may want to purchase: Identify your interests Consider your talents List conditions for your business Quantify your investment
- 17. Due Diligence to Buy an Existing Business Law Office of Prashant Ajmera & Associates 17 Business valuation Obtain all licenses and permits Zoning requirements Environmental concerns Outstanding dues/taxes background check Compliance with Bulk Sale laws
- 18. Business Brokers Law Office of Prashant Ajmera & Associates 18 Brokers can help find businesses for sale that best suit your needs Hotel Convenient store Car wash Small, medium, or large size business Brokers can provide database of businesses for sale and franchise opportunities for a fee
- 19. Starting a New Business Venture Law Office of Prashant Ajmera & Associates 19 Business plan Business assistance and training Business location Financing your business Determine the legal structure of your business Register a business name
- 20. Starting a New Business Venture Contd. Law Office of Prashant Ajmera & Associates 20 Get a tax identification number Register for State and Local taxes Obtain business licenses and permits Understand employer responsibility
- 21. How can Ajmera Law help? Law Office of Prashant Ajmera & Associates 21 Ajmera Law is affiliated with several economic development government authorities of the Mid-West Region of United States (eg. Illinois, Missouri, Iowa, Kansas, Nebraska, Oklahoma, Arkansas) Scope out new and existing business opportunities all over the United States Association with business brokers and professionals Help find or establish business qualifying under the EB5 category
- 22. Moberly Region (Missouri) Law Office of Prashant Ajmera & Associates 22 Strengths in Manufacturing, Metal Fabrication, Composite Fabrication, Logistics, Animal Sciences, Energy, Call Center, Customer Service/Fulfillment Services, Agriculture, Agri- Services Major employers in the Region pull from up to 60 miles 12 Universities & Colleges within 1 hour
- 23. Moberly Region (Missouri) Law Office of Prashant Ajmera & Associates 23 Centralized location in the US offers superb accessibility to vendors & customers Ability to serve the entire US from one location Efficient transportation and improved lead times Within a 1 Day Drive of 52% of all US Manufacturing Proximity to all Major US markets Major transportation arteries with access to all Major US Ports to serve the Global Marketplace
- 24. Foreign Investment in US Real Estate 24 Law Office of Prashant Ajmera & Associates
- 25. Real Estate Investment Law Office of Prashant Ajmera & Associates 25 Severe downturn is US real estate market that took place several years ago, combined with a weak dollar, has produced some relatively good bargains Foreign non-resident real estate owners have two taxation options based on whether the property generates: Passive income; or Effectively connected income (ECI)
- 26. Passive Income v. Effectively Connected Income Law Office of Prashant Ajmera & Associates 26 Passive income is any fixed, determinable, annual or periodic income derived by a foreign investment or business activity, and is subject to 30% tax withholding on a gross basis. Effectively connected income is income that can be shown to be connected to a trade or business, and is taxed on a net basis at the graduated tax rates that apply to any US citizen, resident or entity.
- 27. Foreign Investment in Real Property Tax Act (FIRPTA) Law Office of Prashant Ajmera & Associates 27 This act applies on the sale of US real estate by foreign owners Under this law, any disposition of US real property interests by foreign investors or their corporations are subject to US tax.
- 28. US Labor Laws28 Law Office of Prashant Ajmera & Associates
- 29. Wages & Hours Law Office of Prashant Ajmera & Associates 29 The Department of Labor administers and enforces federal labor laws The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay, which affect most private and public employment Current federal minimum wage rate is $7.25 per hour Some states have implemented higher hourly wage rates
- 30. Family and Medical Leave Act Law Office of Prashant Ajmera & Associates 30 The Family and Medical Leave Act (FMLA) requires employers of 50 or more employees to give upto 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child or for the serious illness of the employee or a spouse, child or parent.
- 31. Other Labor Laws Law Office of Prashant Ajmera & Associates 31 Apart from the two major laws, employers also need to comply with the following: Workplace Safety & Health Workers’ Compensation Employment Retirement Income Security Act Unions Employee Health Insurance Americans with Disabilities Law
- 32. Insurance Requirements32 Law Office of Prashant Ajmera & Associates
- 33. Insurance Requirement for Employers Law Office of Prashant Ajmera & Associates 33 Businesses with employees are required by law to pay for certain types of insurances: Workers’ Compensation Insurance Unemployment Insurance Disability Insurance (in select states) California New Jersey New York Hawaii
- 34. Business Licenses & Permits34 Law Office of Prashant Ajmera & Associates
- 35. Federal & State Licenses and Permits Law Office of Prashant Ajmera & Associates 35 You may need to obtain a federal license or permit if your business is involved in activities supervised and regulated by a federal agency, such as: Selling alcohol, tobacco, and lottery Sale of firearms Commercial fishing Mining and drilling Transportation and logistics Sale or manufacturing of pharmaceutical products
- 36. U.S. Business Related Visas for Foreign Nationals 36 Law Office of Prashant Ajmera & Associates
- 37. Business Visas Law Office of Prashant Ajmera & Associates 37 Your U.S. visa requirements should be a part of the planning process in structuring of your U.S. operation Temporary U.S. visas include: B-1/B-2 visitors visa L-1 intra-company transferee visa EB-1(C) visa for executives and managers transferred from a multinational EB-1 Green Card for aliens of extraordinary ability EB-5 immigrant investor visa H visas – temporary work permits
- 38. B-1 Visa Law Office of Prashant Ajmera & Associates 38 With a B-1, a non-U.S. national cannot work for and be paid by any U.S. source A business owner can, with this visa: Negotiate contracts Consult with business associates Litigate or arbitrate Participate in conventions and seminars Conduct research and engage in certain other permitted activities in the States
- 39. L-1 Visa Law Office of Prashant Ajmera & Associates 39 Requirements for eligibility: Foreign national must be an “executive”, “manager”, or “person of specialized knowledge” Must have worked in a foreign enterprise for at least one year within the past three years in one of the above categories The employee is being transferred to the foreign enterprise’s U.S. subsidiary or branch office temporarily
- 40. L-1 Visa Advantage Law Office of Prashant Ajmera & Associates 40 No annual limits on the number of foreign nationals who can qualify for this category No prevailing wage standards A foreign national can apply for permanent residence without an adverse impact on the nonimmigrant status Employment authorization (EAD) for spouses
- 41. EB-1(C) Law Office of Prashant Ajmera & Associates 41 An EB1C is an immigrant visa in the EB1 category that is reserved for executives and managers transferred from a multinational corporation. An individual is eligible to obtain an EB1C visa if he or she is: Employed as an executive or manager By a qualified company For at least 1 of the past 3 years
- 42. EB-1(A) Visa Law Office of Prashant Ajmera & Associates 42 You may be eligible for an employment-based visa if you have an extraordinary ability, are an outstanding professor or researcher, or are a multinational executive or manager. Each occupational category has certain requirements that must be met:
- 43. EB-5 Visa Law Office of Prashant Ajmera & Associates 43 All EB-5 investors must invest in a new commercial enterprise; Create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years of the immigrant investor’s admission to the United States as a Conditional Permanent Resident; and Required minimum investments are: $1 million for a general business $500,000 for a high-unemployment area or rural area in the United States
- 44. Our Corporate Social Responsibility 44 Law Office of Prashant Ajmera & Associates
- 45. Videsh Vidya Foundation Law Office of Prashant Ajmera & Associates 45
- 46. Contact Law Office of Prashant Ajmera & Associates 46 Law office of Prashant Ajmera & Associates www.ajmeralaw.com prashant@ajmeralaw.com
Notas del editor
- Corporation - Here, we are dealing with setting up a wholly-owned U.S. company. There are many reasons to set up a wholly-owned U.S. company. You may want to have a presence in the market; to satisfy existing customers and prospects; to manufacture, process or assemble products in the States; to protect against liability claims; and to minimize certain tax or customs duty-related costs. A corporation is a separate legal entity usually created under the laws of one of the states or the District of Columbia. Each state enacts its own laws regarding the formation and operation of corporations. Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. Branch of a Foreign Corporation - A branch of a foreign company is just an extension of that company within the USA. Partnership - For legal purposes, a partnership is defined as an association of two or more persons formed to carry on a business for profit as co-owners. Defined by U.S. tax law, a partnership includes a syndicate, pool, joint venture or other unincorporated organization by which any business is conducted ñ and which is not, for federal income tax purposes, a corporation, trust or estate. Limited Liability Company - LLC is a pass-through entity, this means these entities are not subject to income tax. Rather, the owners are directly taxed individually on the income, taking into account their share of the profits and losses. LLC owner(s) must obtain a tax number, prepare and file tax returns and pay the resulting taxes due. Joint Venture – Foreign and US parties form a corporation under US state laws, each owning a particular percent and yet retaining their individual identity. There are three types of U.S. JV’s Distribution JV Production JV R&D JV
- State of Incorporation - Under which U.S. state’s laws shall I form my corporation? The answer will vary depending on the particular company’s needs. In most cases, though, the choice comes down to Delaware because it has business friendly corporate laws and the Courts usually tend to rule in favor of businesses. Also, Delaware imposes no sales tax. Name of the Corporation – The name of a corporation formed in one state is not protected in other states. Minimum capital - In most states, there is none; and the minimum is very low in those states that specify one. That means that you are essentially free to decide on the amount of capital you want to contribute. Nationality or Residency Requirements - All of the members of the U.S. corporation’s Board of Directors and all of its officers can, if so desired, be non-U.S. nationals and U.S. non-residents. Tax returns – The corporation must file tax returns even if it is inactive. Office leases – You can lease office space in many different ways: a lease of real office space in a building; leasing space from a business incubator or “baby-sitting” firm; leasing via an office-sharing arrangement; leasing a “virtual office”, etc. Insurance - You will need certain types of insurance for the U.S. operations, and may wish to consider other types. Examples in the commercial insurance area are: general liability insurance; product liability insurance (which may or may not be part of the general liability insurance); business property insurance, covering your own goods and physical property; directors and officers liability, etc. Corporate bank accounts – These are usually set up by an American lawyer because it is a lengthy and complex procedure. Repatriation of capital – The process by which you can bring the $$ earned in the United States to India. You need to be aware of the foreign exchange risk and the tax implications of such repatriation
- SSN - You will need to complete Form SS-5, Application for a Social Security Card. You also must submit evidence of your identity, age, and U.S. citizenship or lawful alien status. EIN - An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity. Generally, all businesses need an EIN. ITIN - An ITIN, or Individual Taxpayer Identification Number, is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN). To obtain an ITIN, documentation substantiating foreign/alien status and true identity for each individual are required. PTIN - Beginning January 1, 2011, a paid tax preparer must use a valid Preparer Tax Identification Number (PTIN) on returns prepared.
- Federal corporate income tax is imposed at graduated rates. The lower rate brackets apply to lower rates of income when compared to higher tax brackets that coincide with higher rates of taxable income. The corporate income tax rate is approximately 40%. The marginal federal corporate income tax rate on the highest income bracket of corporations is 35%. State and local governments may also impose income taxes ranging from 0% to 13%, the top marginal rates averaging approximately 7.5%. The effective rate may vary significantly depending on the locality in which a corporation conducts business.
- The U.S. does not levy a Value Added Tax (VAT) or Goods & Services Tax (GST). Instead there is a sales tax. This is a transactional tax imposed by state and local jurisdictions on sellers/consumers related to the sale/purchase of tangible personal property (TPP) and certain services. There is no federally imposed sales tax. Sales tax is generally collected at the point of purchase of taxable goods and services by end users.
- Disadvantages to Choosing an Existing Business There are also some downsides to buying an existing business. Purchasing cost may be much higher than the cost of starting a new business because of the initial business concept, customer base, brand and other fundamental work that has already been done. Also, be aware of hidden problems associated with the business like debts the business is owed that you may not be able to collect.
- Hiring an experienced business broker can help you navigate complicated issues like business valuation. We recommend that you hire a certified business broker.
- Starting a new business in US also includes starting a marketing, sales or branch office (eg. Subsidiary)
- Regional centers – Area in US where populations in less than 20,000 or unemployment is time and a half of the national average.
- In either case, you will need a real estate agent
- Passive income - The property treated as an investment property and subject to a flat 30% tax. Most income received by foreign persons from U.S. investments, including, rent, is taxed at a flat 30%, and the foreign person is permitted no deductions related to the operations of the property. That means that if there is a mortgage on the property, the interest payments are not deductible. However, many countries have entered into income tax treaties with the U.S. reducing the 30% rate to a lesser amount. ECI - Income from real estate that is "effectively connected" with a U.S. trade or business is taxed to the owner of the real estate at the same rates that apply to U.S. individuals and corporations. In addition, the owner can claim deductions that arise from the operation of the property.
- Employers need to comply with the higher of the two, i.e. if federal minimum wage is $7.25 and state minimum wage is $8.25, then employers must pay at $8.25/hour
- Workers’ compensation insurance - Businesses with employees are required to carry workers' compensation insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. Unemployment Insurance - Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state's workforce agency. Disability Insurance - Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury.
- For agricultural activities, you will need a permit from USDA (US Department of Agriculture) If you manufacture, wholesale, import, or sell alcoholic beverages at a retail location, you will need to register your business and obtain certain federal permits (for tax purposes) with the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB). If you operate an oversize or overweight vehicle, you’ll need to abide by the U.S. Department of Transportation’s guidelines on maximum weight. Permits for oversize / overweight vehicles are issued by state government.
- Specialized knowledge - means knowledge possessed by an individual whose advanced level of expertise and proprietary knowledge of the organization’s product, service, research, equipment, techniques, management, or other interests of the employer are not readily available in the United States labor market. This definition does not apply to persons who have general knowledge or expertise, which enables them merely to produce a product or provide a service. The L-1 is tied to the particular U.S. employer (subsidiary, branch or affiliate of the foreign company), meaning that the holder cannot work for another U.S. employer. By filing a special application, the spouse of L-1 visa holder can receive a visa permitting the spouse to work in the USA.
- Unlike other employment based categories, the quota for EB1 class petitions generally is never met, therefore, a visa or change of status to EB1 can be obtained as soon as the petition is approved. EB1 cases do not require any test of the US job market either. The process can be completed in a matter of months. An organization is qualified if it is either a US affiliate, parent or subsidiary of a foreign business entity. The terms “affiliate,” “parent,” and “subsidiary” are defined by immigration regulations.
- * Criteria for Demonstrating Extraordinary Ability You must meet 3 out of the 10 listed criteria below to prove extraordinary ability in your field: Evidence of receipt of lesser nationally or internationally recognized prizes or awards for excellence Evidence of your membership in associations in the field which demand outstanding achievement of their members Evidence of published material about you in professional or major trade publications or other major media Evidence that you have been asked to judge the work of others, either individually or on a panel Evidence of your original scientific, scholarly, artistic, athletic, or business-related contributions of major significance to the field Evidence of your authorship of scholarly articles in professional or major trade publications or other major media Evidence that your work has been displayed at artistic exhibitions or showcases Evidence of your performance of a leading or critical role in distinguished organizations Evidence that you command a high salary or other significantly high remuneration in relation to others in the field Evidence of your commercial successes in the performing arts
- This visa category was created to stimulate the U.S. economy through job creation and capital investment by foreign investors. Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business
- Our experience in foreign education has motivated us to meet our social responsibility by providing ethical and unbiased information to parents and students which empowers them to envision their life abroad. We conduct seminars and provide counselling services to students and parents in schools and colleges, thereby allowing students to pave their path to success internationally by making informed decisions.